KRATOS DEFENSE & SECURITY SOLUTIONS, INC. KTOS

52% shingled-prose overlap between the two filings.

2025: 96,691 chars · 2026: 100,318 chars

• Committee Report:39% overlap (6,000 → 6,000 chars)
• Pay Ratio (Item 402(u)):67% overlap (2,407 → 2,411 chars)
• Say-on-Pay proposal:47% overlap (17,384 → 18,434 chars)

• changedKratos’ named executive officers for fiscal year 2025 2024include its Chief Executive Officer, its Chief Financial Officer, and its three most highly compensated executive officers (other than the Chief Executive Officer and Chief Financial Officer) who were serving as executive officers at the end of fiscal year 2025. 2024.
• changedOur named executive officers for fiscal year 2025 2024are Eric DeMarco, President and Chief Executive Officer; Deanna Lund, Executive Vice President and Chief Financial Officer; JonahAdelman,PresidentoftheMicrowaveElectronicsDivision;Phillip Carrai, President of the Space, Training & Cyber Division; andSteven Fendley, President of the Unmanned Systems Division, and Stacey Rock, President of the Turbine Technologies Division.
• changedIn this theCD&A, Mr. DeMarco and Ms. Lund are sometimes referred to as “corporate named executive officers” and Mr. Carrai, Adelman,Mr. Fendley, Carraiand Mr. Rock Fendleyare sometimes referred to as “operational named executive officers.”
• changedNext, we cover Kratos’ 2025 2024Say-on-Pay Vote Results, Stockholder Feedback, and Compensation Program Decisions; Compensation Philosophy and Objectives; and 2025 2024Compensation Program Decisions.
• changedFinally, we engage in a detailed discussion and analysis of the Compensation Committee’s specific decisions about the compensation of our named executive officers in 2025 2024and the changes the Compensation Committee made for fiscal year 2025. 2024.
• changedKratos’ Fiscal 2025 2024Financial Performance and Executive Compensation
• changedGoals for Transformational Fiscal 2025 2024
• newIn establishing the 2025 executive compensation program, our Compensation Committee considered the expectations that 2025 would be another transformational year for the Company, as the Company was awarded a number of new large multi-year strategic programs, certain of which include follow-on production orders and/or options that are expected to be exercised in the future.
• changedIn addition, establishingthe2024executivecompensationprogram,ourCompensationCommitteeconsideredtheexpectationsthat2024wouldbea transformationalyearfortheCompany,asthenumber of production and other delivery type programs and contracts achieved the critical mass necessary for the Company to continue to make important internally funded investments, consistent with Kratos’ long term transformational organic growth objectives, while also including ambitious goals of achieving organic revenue growth, increased Adjusted EBITDA EBITDA,and margin expansion, with a careful balance of our goals to increase operating cash flow generation, while continuing to make significant discretionary investments for strategic growth opportunities in a current industry environment marking a recapitalization of strategic platforms and weapon systems. opportunities.
• changedSuccessful Achievement & Overachievement of 2025 2024Goals
• changedThe Company’s 2025 2024financial results substantially achieved or exceeded each of its financial goals for 2025, 2024,which included the following:
• changed•Adjusted EBITDA grew from $105.7 $95.4million in 2024 2023to $119.9 $105.7million in 2025, 2024,even after reflecting increases in investments in business development, bid, proposal, and new business capture, pursuit, and company funded research and development efforts.
• changedKratos was also able to significantly increase its 2025 2024Adjusted EBITDA after absorbing significant inflation related costs in its ~70% fixed price contracts, which Kratos is wasunable to pass on to its customers until the renewal of such long-term contracts are renegotiated in future years. customers.
• new•Revenue grew from $1.136 billion in 2024 to $1.347 billion in 2025, with 16.6% organic revenue growth exceeding our ambitious goal of increasing revenue to $1.330 billion, and our organic growth goal of 14% - 15% over 2024 Revenues.
• newThe revenue growth in 2025 reflects a 16.6% consolidated organic revenue growth, with organic revenue growth of 19.3% in the Company’s Kratos Government Solutions (“KGS”) segment, with organic growth across all divisions, with the most notable increases in the Defense Rocket Support, Microwave Products, and Space, Training and Cyber businesses, generating 56.3%, 17.1% and 13.6% organic growth, respectively, and 7.9% organic revenue growth in the Company’s Unmanned Systems segment.
• new•Continued to make significant investments to expand and build new production facilities with total capital expenditures of $95.3 million in 2025 and continued investments of over $10.0 million to procure solid rocket motors for our hypersonic business, certain unmanned systems initiatives and enhancements, and continued development efforts related to the Company’s OpenSpace software.
• changed•Record backlog at December 28, 2025 29,2024of $1.573 $1.445billion, last twelve months ended December 28, 2025 29,2024book to bill ratio of 1.1 1.2to 1, record bookings of $1.475 $1.354billion for the twelve months ended December 28, 2025, 29,2024,and a record bid and proposal pipeline of $13.7 $12.4billion at December 28, 2025. 29,2024.
• changedSpecifically, we have increased internally funded research and development and capital expenditures, including for drone aircraft and satellite systems, non-recurring engineering expenditures, and infrastructure investments, including executive management, bid, proposal and new business capture, pursuit, information technology and security, government and public relations, and related expenses.
• changedSince 2013, we have invested over $310 $262million in our UAS business and since 2019, approximately $315 $252million in our Space, Satellite and Cyber business.
• changedKratos is a technology, products, system and software company addressing the defense, national security, and globalcommercial markets.
• changedKratos makes true internally funded research, development, capital and other investments, to rapidly develop, produce and field solutions that address our customers’ mission critical needs and requirements.
• changedAt Kratos, affordability is a technology, and we seek to utilize proven, leading edge approaches and technology, not unproven bleeding edge approaches or technology, with Kratos’ leadingtechnologyapproach designed to reduce cost, schedule schedule,technicaland financialrisk, and enable us to be first to market with cost effective solutions.
• changedWe believe that Kratos is known as the innovative disruptive change agent in the industry, a company that is an expert in designing products and systems up front for successful rapid, large quantity, low cost future manufacturing, which is a value add competitive differentiator for our large traditional prime system integrator partners and also for toour government and commercial customers.
• changedKratos intends to pursue program and contract opportunities as the prime or lead contractor when we believe that our probability of win is high and any investment required by Kratos is within our capital resource comfort level.
• changedWe intend to partner and team with a large, traditional system integrator when our assessment of probability of win is greater todosoor when the required investment is beyond the Company’s comfort level.
• changedKratos is recognized as a technology company addressing the needs and requirements of National Security, DoW DoDand commercial markets and also as a disruptive force in these markets as a result of, among other things, Kratos’ low cost and affordability compared to traditional market participants.
• new•During 2025 we executed a formal teaming agreement with GE Aerospace to advance propulsion technologies for the next generation of affordable unmanned aerial systems and Collaborative Combat Aircraft-type (CCA-type) aircraft.
• newThe collaboration strengthens Kratos’ ongoing partnership with GE Aerospace – building on the 2024 Memorandum of Understanding (MOU) to advance the development and production of small, cost-effective engines for unmanned platforms.
• newThe new 2025 teaming agreement expands on that MOU and provides the framework for Kratos and GE Aerospace to develop, manufacture, test, and field the GEK800 engine, as well as collaborating on other low-cost expendable turbofan engines.
• newIn October 2025, the Company and
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• newGE Aerospace announced the successful completion of altitude testing on the GEK800 engine.
• newIn addition to the joint work on the GEK800 engine, Kratos and GE Aerospace have commenced work on another new engine, the GEK1500.
• newThe engines under development support unmanned aerial systems (UAS), collaborative combat aircraft, and similar applications, positioning Kratos and GE Aerospace to offer affordable mass propulsion solutions across a range of next-generation defense applications for the Department of War.
• changedSubsequent to the successful flights of the Zeus SRMs and the Erinyes hypersonic system, Kratos was awarded the MACH-TB 2.0 Hypersonic System related contract, the largest contract in Kratos history at $1.45 billion, if all options are exercised over a five-year period, to support the Office of the Under Secretary of Defense for Research and Engineering (OUSD (R&E)) Test Resource Management Center (TRMC) National Hypersonic Initiative 2.0 by creating an affordable flight test bed to rapidly increase hypersonic flight test capacity. period.
• newKratos announced that it supported the Missile Defense Agency (MDA) and the Naval Sea Systems Command (NAVSEA) in a successful flight of Kratos’ Erinyes Hypersonic Test Bed in January 2025, from the NASA Wallops Flight Facility in Virginia.
• newThe successful flight of Erinyes expanded the vehicle’s performance envelope and demonstrated the utility of the platform as a low-cost, rapidly configurable test bed for hypersonic experimentation supporting U.S. Department of War initiatives.
• new•Representative additional major contract awards for Kratos include a $34.8 million contract from the U.S. Marine Corps (USMC) for Valkyrie mission system integration, a $116.7 million prime contract to create and operate an Advanced Fire Control Ground Infrastructure (AFCGI) from the U.S. Space Development Agency, an approximate $100.0 million total potential value hypersonic system program award, a $48.0 million contract for geolocation global support services, a $59.3 million award for additional BQM-177A subsonic aerial target system, a potential subcontract value of greater than $50.0 million if options are exercised for short/medium range suborbital vehicles, two contract awards for approximately $30.0 million each for air defense related hardware, a $25.0 million contract task order under the Command and Control System-Consolidated (CCS-C) Sustainment and Resiliency (C-SAR) contract with the U.S. Space Force Space Systems Command to support ground system capabilities for evolved strategic satellite communications, a single award Phase 1 agreement with an initial total projected ceiling of $175.0 million across multiple phases to develop an organic sustainment capability for the U.S. Navy’s AN/SPY-1 radar systems, a single award projected value $68.3 million contract to build a state-or-the-art mid-tier arc jet and coupled fiber laser facility for hypersonic materials evaluations, known internally as Project Helios, and a recent announcement that Kratos’ teammate Northrop Grumman was competitively awarded the USMC’ Marine Air-Ground Task Force Uncrewed Expeditionary Tactical Aircraft (MUX TACAIR) Collaborative Combat Aircraft (CCA), which combines Northrop Grumman’s uncrewed capabilities and autonomous leadership with Kratos’ Valkyrie uncrewed aerial system to work alongside crewed fighters to provide air dominance in high-threat environments.
• newThe new joint venture, named Prometheus Energetics
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• changedThenewjointventure,namedPrometheusEnergetics(Prometheus), is settobeheadquartered on an approximate 550-acre site near the United States Navy and Army facility in Crane, Indiana.
• new•Additional notable events and/or announcements which exemplify the Company’s increased investments for current or future program opportunities include the ground breaking of Kratos’ $50 million state-of-the-art 68,000 square foot hypersonic system Indiana Payload Integration Facility (IPIF) which will support critical hypersonic vehicle and payload activities and systems for the MACH-TB program; the opening of a new propulsion manufacturing facility in Auburn Hills, Michigan to fulfill upcoming demand for Kratos’ Spartan engines, a family of high-quality, low-cost, military grade turbojet engines; the opening of a new 60,000 square foot Jerusalem facility for our Microwave Electronics division dedicated to precision assembly, testing, and production of qualified microwave assemblies and subsystems; the opening of a new 55,000 square foot state-of-the-art hypersonic system manufacturing and payload integration facility in Princess Anne, Maryland; the expansion of our operations in Birmingham, Alabama with the addition of a new 40,000 square foot facility to house electro-mechanical systems and integration; and the Company’s announcement that it issued a letter of intent for 60 full rate production Zeus Solid Rocket Motors from L3Harris Technologies, comprised of 40 Zeus 1 and 20 Zeus 2 hypersonic motors.
• changedIrrespective of challenges that have impacted Kratos and the industry, including as related to inflation, supply chain disruptions, recurring federal government budget delays, the ongoing challenges encountered to obtain or retain qualified personnel, and the increasing cost of technical skilled labor, Kratos completed 2025 2024generating revenue of $1.347 $1.136billion, a 18.5% 9.6%increase over 2024 2023revenue of $1.136 $1.037billion, and organic revenue growth of 16.6%. 9.1%,whichsuchgrowthrateincludeda$47.8milliondecreaseintheCompany’sSpaceandSatellitebusiness,whichincludedtheindustryrelatedimpactfromOEMdelaysinthemanufactureanddeliveryofsoftwaredefinedsatellitestoKratos'satelliteoperatorcustomers.
• changedKratos’ Unmanned Systems segment grew revenues organically 7.9% 25.1%from $270.5 $212.2million in 2024 2023to $292.0 $270.5million in 2025, 2024,primarily driven by increased tactical domesticandinternationaldrone activity.
• newKratos’ largest segment, KGS, grew revenues from $865.8 million in 2024 to $1.055 billion in 2025, representing organic revenue growth of 19.3%, which was driven by increased revenues across all KGS divisions, with the most notable increases in the Company’s Defense Rocket Support, Microwave Products, and Space, Cyber and Training businesses, generating organic revenue growth rates of 56.3%, 17.1% and 13.6%, respectively.
• changedAdjusted EBITDA increased from $105.7 $95.4million in 2024 2023to $119.9 $105.7million in 2025, 2024,driven by the increased revenue volume and a favorable mix of revenues, offset partially by increased labor, subcontractor and inflation related costs on multi-year fixed priced contracts and increased bid, proposal, business development, new business pursuit and research and development costs.
• changedAdditionally, we also completed 2025 2024with a record backlog of $1.573 $1.445billion, a record bid, proposal and opportunity pipeline of $13.7 $12.4billion, and with every Kratos business forecasting organic revenue growth for 2026 2025over 2025. 2024.
• changedFor 2026, 2025,Kratos is forecasting consolidated revenue growth of approximately 12.7% 9%to 18.5% 11%over 2025, 2024,and an initial revenue growth forecast for 2027 2026of 18% 13%to 23% 15%over 2026 2025forecast based on recent program awards, which we believe represents an industry leading growth trajectory as compared to our peer group.
• changedOver the past several years, Kratos’ strategy has also resulted in significant value creation for our stockholders, including as represented by Kratos share price increasing from $10.32 attheendoffiscalyear2022upto$20.29attheendoffiscalyear2023,andupto$26.52at the end of fiscal year 2024.
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• new2022 up to $20.29 at the end of fiscal year 2023, up to $26.52 at the end of fiscal year 2024, and up to $77.70 at the end of fiscal year 2025.
• changed2025 2024Say-on-Pay Vote Results, Stockholder Feedback, and Compensation Program Decisions
• changedThroughout 2025, 2024,the Company continued its ongoing engagement with stockholders: presenting at multiple virtual investor conferences throughout the year, with numerous Kratos stockholders participating; speaking with the top 10 to 15 mutual and hedge fund stockholders typically on a quarterly basis, or sometimes monthly or even more frequently; and maintaining open lines of communication with stockholders, many of whom reach out to the Company after each earnings release and after the Company issues significant press releases.
• changedAdditionally, Kratos stockholders are aware of the nature of the industry we operate in, the federal government contracting industry, and that federal budgets can and typically do have extensive delays, that the federal government can shut down, that customers can pause work or issue stop work orders, that budgets can have different priorities with changing Administrations or individuals, etc., any of which can impact a particular year or the near-term operating environment for the industry and the Company, including particular programs and contracts.
• newThe Compensation Committee
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• newcontinues to apply a consistent number of shares for RSU grants to its executives over the past multiple years, maintaining a similar annual share grant quantity, without any fluctuation for year to year market share price declines or increases, with the intent of the total overall number of shares granted over the multiple year period to equalize after taking into consideration market price fluctuations.
• changedSince the Compensation Committee began issuing performance-based LTI grants in 2020, which account for 50% of the LTI grants (or between 58% 60%and 83% 80%of the executive’s target annual compensation), the Company has reported Adjusted EBITDA growth of 23.4% as of December 31, 2023, 2023and36.7% as of December 29, 2024, and 55.1% as of December 28, 2025, respectively, as compared to the baseline Adjusted EBITDA in 2019, and with a recent sequential 13.4% 10.8%growth in Adjusted EBITDA from 2024. 2023.
• changedAt our annual meeting in 2025, 2024,our stockholders approved, on an advisory basis, the “say-on-pay” resolution for the compensation of our named executive officers in fiscal year 2024, 2023,with 91.74% 92.22%of the votes cast in favor of the advisory vote (excluding abstentions and broker non-votes).
• changedConsidering the advisory vote approving the 2024 2023compensation of our named executive officers, our Compensation Committee has continued to employ the same principles in determining the compensation program for 2025. 2024.
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• changedFor 2025, 2024,performance-based RSUs, which represent 50% of RSU grants, vest based on the Company’s Adjusted EBITDA growth during a five-year period, with 33.3% vesting for every 10% increase in Adjusted EBITDA.
• newNo Hedging or Pledging—The Company maintains a policy that prohibits hedging and pledging transactions in the Company’s Common Stock by directors and executive officers.Clawback Policy – The Company continued its Clawback Policy, under which, in the event that the Company is required to prepare a Restatement (as defined in the Clawback Policy), the Company shall recover, reasonably promptly, the portion of any Incentive-Based Compensation (as defined in the Clawback Policy) that is Erroneously Awarded Compensation (as defined in the Clawback Policy), unless the Committee (as defined in the Clawback Policy) has determined that recovery would be Impracticable (as defined in the Clawback Policy).
• changedThe Clawback Policy was Additionally,weupdated ourcompensationrecoverypolicyin 2023 in order pursuantto align with the requirements under of Rule 10D-1 under the Securities Exchange Act of 1934, as amended, and the corresponding rules adopted by the NASDAQ Stock Market.
• newA copy of the Clawback Policy is filed as Exhibit 97 to our Annual Report on Form 10-K for the fiscal year ended December 28, 2025.
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• changedCompensation Philosophy and ObjectivesObjectives of Executive Compensation ProgramOur executive compensation program is designed to: • Build long-term stockholder value • Deliver strong business and financial results • Attract, motivate and retain a highly qualified and effective management team to lead our businessPhilosophy of Executive Compensation ProgramOur executive compensation philosophy is built on five principles: • Align compensation with stockholders’ interests and avoid excessive risk taking • Pay for performance • Emphasize long-term focus • Align compensation to market • Provide appropriate degrees of at-risk and performance-based compensationMethods to Achieving the Executive Compensation Program Objectives• Tie annual and long-term cash and stock incentives to achievement of measurable corporate and individual performance objectives • Reward individual performance and reinforce business strategies and objectives for enhanced stockholder value • Evaluate employee performance and compensation to ensure we can attract and retain employees in a competitive manner • Ensure total compensation paid to executive officers is fair, reasonable and competitive, considering accomplishments of the individual executive officers and the Company as a wholePrincipal Elements of the Executive Compensation Program• Base salary • Annual performance-based incentive cash bonus awards • Long-term equity incentives in the form of RSUs and stock options and other equity awards• awards.•Other benefits and perquisites, such as life and health insurance benefits and a qualified 401(k) savings plan offered to all employees • Post-termination severance and accelerated vesting of previously granted equity awards upon termination and/or a change of control
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• changed2025 2024Compensation Program Decisions
• changedThe following list summarizes the compensation decisions that our Compensation Committee made in 2024 2023for fiscal year 2025 2024executive compensation.
• changedDecisions for our named executive officer base salaries and equity incentive awards effective for the start of fiscal year 2025 2024were made in December 2024. 2023.
• changed•In InSeptember 2024, the Company’sCompensation Committee performed its annual review of the compensation packages for each executive officer, including our Chief Executive Officer, and specifically Mr. DeMarco’s performance and direct successful impact on the Company’s strategic positioning and execution in multiple priority funded growth areas in the industry, including our identification, establishment and execution of new opportunities associated with new strategic collaboration agreements and ventures in the turbo fan and solid rocket motor propulsion areas, and the Company’s overall advancement and achievement in accordance with the Company’s long-term goals.
• changedAs part of the Compensation Committee’s review process, it also took into consideration that many peer companies of Kratos’ size have a separate Chief Executive Officer and Chief Operating Officer; while at Kratos, the roles and responsibilities of both the CEO and COO are performed and executed successfully by Mr. DeMarco, as reflected in the Company’s record financial performance, in particular, revenues and Adjusted EBITDA, and the Kratos backlog and bid and proposal opportunity pipeline.
• changedAs a result of the Compensation Committee’s review, the Committee recommended an increase in the Chief Executive Officer’s base salary from $850,000 to $1,000,000 for 2025, which is equivalent to the base salary of the 75th percentile of CEOs in the Company’s Compensationpeer group.
• newAdditionally, as part of the Compensation Committee’s review, it was noted that after several years of being frozen, the base salaries of two other Kratos executive officers should be increased in order to align their salaries to reflect their roles, responsibilities within Kratos and competitive positioning in the market.
• changedThe compensation for the Company’s executives continues to remain primarily incentive-based and directly tied to the Company’s financial performance and growth, in order to maintain close alignment with long-term stockholder interests.
• changedThe Compensation Committee continued the equity package grants consistent with the modifications made in prior years, whereby performance-based RSUs granted in January 2025 2024vest based on the Company’s Adjusted EBITDA growth during a five-year period, with 33.3% vesting for every 10% increase in Adjusted EBITDA, as compared to the Company’s Adjusted EBITDA for 2024. 2023.
• changedThe Compensation Committee believes that the long-term growth, value, and success of the Company is best measured by growth in Adjusted EBITDA, on which we believe the Company is primarily valued, based on the reasons described below and based on feedback from the Company’s stockholder outreach and communication program.
• changedThe Compensation Committee believes that growth in Adjusted EBITDA reflects the quality of the Company’s revenue growth; the Company’s return on internal investments made; the profit contribution and quality of that profit from growth in revenues; the expected leverage on the Company’s fixed overhead, manufacturing, research, development and SG&A infrastructure as the Company grows; and the expected increase in profits,cashflowandstockholderreturnsasstrategicinitiativesandprogramssuccessfullytransitionfrominvestmenttodevelopmenttoproduction.
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